Recently, the king of AI, $NVIDIA Corp(NVDA)$ , disclosed its 13F filing, revealing its holdings for the first time!
According to the document, Nvidia holds a total of five stocks, namely chip design company $ARM Holdings Ltd(ARM)$ , biotechnology company $Recursion Pharmaceuticals, Inc.(RXRX)$ , voice AI company $SoundHound AI Inc(SOUN)$ , autonomous driving company $TuSimple Holdings Inc.(TSP)$ , and medical imaging developer $Nano-X Imaging Ltd.(NNOX)$ .
After the exposure of the holdings data, the stock prices of the relevant companies skyrocketed, with SoundHound surging 69.4% in two trading days and NANO-X jumping 103.6%!
The appeal of the King of AI is astonishing!
Why did the giant Nvidia, with a market capitalization nearing $2 trillion, invest in these five companies? What does Nvidia see in them? And are there investment opportunities in these five companies?
1.Arm Holdings
Let's start with Arm, which has the largest holding. As of the cutoff date of the 13F (December 31st), Nvidia's holding value reached $147 million, accounting for 63.95% of its investment portfolio.
Arm is a chip design company that went public in 2023. Almost all smartphones in the world use Arm architecture, and it is currently penetrating into the Internet of Things and computer terminals, showing great potential for development.
Arm was originally a British chip company, but was later acquired and delisted by SoftBank of Japan. In 2020, Nvidia attempted to acquire it for $40 billion, but was rejected by regulators for antitrust reasons.
After listing, Arm's stock price has performed brilliantly, and today's market value has reached $131.9 billion, up 154% from its IPO valuation!
Despite the failed acquisition, Nvidia's reason for investing in Arm is simple: it hopes to combine its own GPU with Arm's CPU system, breaking its dependence on Intel while building a world-leading computing company in the AI era!
Although this plan fell short, Arm is an independent chip design IP company. Nvidia can still integrate its GPU with Arm's technology patents, which will not affect its status of the king of AI.
2.Recursion
Now let's look at the second largest holding, Recursion, which Nvidia holds a market value of approximately $76 million, neither significant in terms of amount nor shareholding ratio.
Recursion is an AI biopharmaceutical company that leverages proprietary large models to accelerate drug discovery. Its fastest-progressing drug has advanced to Phase 2 of clinical trials:
Apart from developing drugs themselves, Recursion also collaborates with other pharmaceutical companies to aid in drug discovery. For instance, in 2021, the company signed an agreement with Roche and its subsidiary Genentech, agreeing to collaborate on up to 40 projects in the fields of neurology and cancer. Roche has already paid a $150 million upfront, and Recursion could potentially receive billions more in milestone payments in the future!
In the realm of AI pharma, Recursion is a leader. Their partnership with Nvidia, announced in July 2023, caused a frenzy in the stock market, temporarily skyrocketing Recursion's share price. But after the hype died down, the stock price hit a new low.
The application of AI technology to biomedical research and development is not new, both large pharmaceutical companies and contract development and manufacturing organizations (CDMOs) are actively entering this field. It's not so much that Nvidia sees potential in Recursion as they do in hoping to enhance their biopharmaceutical modeling technology and promote their AI cloud service, BioNeMo, through this collaboration.
Put simply, Nvidia is optimistic about the application of AI technology in the biomedical field, and hopes for a transformation from life science to life engineering, which would in turn drive the sale of more GPUs.
At the 2024 World Government Summit held in February this year, Nvidia CEO Jen-Hsun Huang talked about the application of AI in biopharmaceutics. His insightful remarks provide valuable insights into Nvidia's intentions in investing in biopharmaceutical companies:
"If I could start from scratch, I would realize that understanding biology, especially human biology, is the most complex area in science. Not only because of its diversity and complexity, but also because comprehending the essence of life itself is a daunting challenge that holds significant impact. Keep in mind, we refer to this field as life science, and drug discovery as "discovery", as if we've stumbled upon a new continent while wandering through the universe. Unlike this, computer science and other prevailing industries today wouldn't describe their achievements as "discoveries." No one would say, "I discovered this software today." We call it engineering. Our computer science and software are constantly evolving, and chips and infrastructure are constantly improving. However, the progress in life science is sporadic. If I had the chance to start from scratch now, I would recognize that the technology to turn life science into life engineering has arrived. Digital biology will become an engineering discipline, not just a science. In the future, it will certainly encompass science, but it will no longer be solely a science. Therefore, I hope this will usher in a new era where people are passionate about working with proteins, chemicals, enzymes, and materials, engineering outstanding achievements that are more energy-efficient, lighter, stronger, and more sustainable. All these future inventions will be part of engineering, rather than just scientific discoveries."
3.NANO
Understanding this also explains why Nvidia invested in NANO, an AI medical imaging recognition company. Looking at the investment amount, Nvidia's shareholding value is only $380,000, which seems more like a casual bet than a serious investment. The underlying intention is likely to promote the application of GPUs in the field of medical imaging.
4.TuSimple
Nvidia's investments in the other two companies are also relatively small, around $3 million each, which doesn't have much significance for investors. Among them, TuSimple, a company specializing in autonomous trucking, has already announced its delisting, and Nvidia has its own autonomous driving chip, Orin, so the investment may be more about selling its products.
5.SoundHound
The investment in SoundHound, a voice AI company, is also based on the logic of selling products. If they really believed in the company's potential, the investment amount would probably be more than just millions of dollars.
Overall, whether Nvidia is buying Arm or investing in biopharmaceutical companies, Jen-Hsun Huang's ultimate goal is to sell more products. Among these five companies, Arm holds the highest value, while Recursion's success faces significant uncertainty. As for the others, investors need to keep their eyes open!
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